What to Expect from Our Local and State Economy
Tatiana Bailey, Ph.D.
Director, Southern Colorado Economic Forum
What to Expect from Our Local and State Economy
Tatiana Bailey, Ph.D.
Director, Southern Colorado Economic Forum
What We’ll Discuss:
Join us for the ninth year of one of our most popular sessions. We will preview the 19th Annual Southern Colorado Economic Forum, which is October 23, 2015. Register for the forum at www.southerncoloradoeconomicforum.com.
April 1 may be April Fool’s Day, but April 15 might be considered April’s cruel day. Not only do you have to pay any income tax due for the previous year, you also may have to make an estimated tax payment for the current year. A poor estimate might result in either an underpayment that triggers a penalty or an overpayment that deprives you of valuable cash flow.
Paying as an individual
Many business owners will pay estimated tax on the same IRS Form 1040-ES that individuals use for estimated tax. That’s the case if you run your business as an S corporation, a partnership, an LLC electing partnership taxation, or a sole proprietorship.
Business owners filing estimated taxes on Form 1040-ES must pay in four installments. The first payment is due on April 15 each year; the next payment is due only two months later, on June 15, so there may be a cash crunch. Subsequent deadlines give you more time; payments are due on September 15 and January 15 of the following year. Use IRS Form 1040-ES for these payments.
You generally have to file estimated tax on Form 1040-ES if you owe $1,000 or more in tax when you file your return for the year. Thus, estimated tax won’t be a concern for businesses that will show a loss on their annual tax return.
You can avoid an underpayment penalty if all of your tax payments for the year—including withholding and tax credits—cover your ultimate tax bill, or at least go far enough that you come up short by less than $1,000. However, few business owners can accurately predict their 2014 tax obligation on April 15 or even June 15.
Thus, there are two safe harbors for those required to pay estimated tax. If you pay either (a) 90% of your current year’s tax obligation, or (b) 100% of the prior year’s tax, you won’t owe any penalty.
Pam Owens has an interior design practice, set up as a sole proprietorship. When Pam prepares her tax return for 2013, it shows a $60,000 tax obligation for the year. Pam has no overpayment to put towards her 2014 tax obligation and she does not plan to have tax withheld during the year.
If Pam were confident of owing another $60,000 in tax this year, she could pay $54,000 (90% of $60,000) in estimated tax this year: $13,500 in each of four scheduled installments. That would avoid any risk of owing a penalty.
However, Pam does not know how much business income she’ll earn in 2014. If Pam’s income is much greater than in 2013, and she follows that $54,000 schedule, she could underpay her estimated tax and owe a penalty.
As an alternative, Pam could make four $15,000 estimated tax payments for 2014. That would total $60,000 in estimated tax—100% of her 2013 tax bill—and exempt Pam from a penalty.
However, if Pam’s adjusted gross income (AGI) in 2013 exceeded $150,000, she must pay more estimated tax under the safe harbor. Above that threshold, the safe harbor requires paying 110% of the prior year’s taxable income, rather than 100%. Thus, Pam decides to pay estimated tax this year in four $16,500 installments. This will bring Pam’s estimated tax total to $66,000—110% of the $60,000 in tax that she owed for 2013—so she won’t owe a penalty.
Note that this example assumes that Pam expects an increase in business this year, and a larger tax obligation. If there is some reason to expect a smaller tax obligation, Pam can reduce her obligation accordingly to meet the 90% safe harbor requirement.
The estimated tax rules for regular C corporations are similar but slightly different than those for individuals. Corporations must make installment payments on IRS Form 1120-W if the expected estimated tax for the year is $500 or more. Equal payments are due on the 15th day of the company’s 4th, 6th, 9th, and 12th months of the corporation’s tax year. A corporation with a tax year ending June 30, for example, would make payments by October 15, December 15, March 15, and June 15. (As is the case with individual estimated tax payments, the deadline is postponed to the next business day if the 15th is on a weekend or a legal holiday.)
The safe harbors for corporate estimated tax are both 100%. Thus, each installment should be at least 25% of the company’s current year income tax or 25% of the prior year’s income tax, whichever is smaller, in order to avoid an underpayment penalty.
Some businesses are seasonal, and estimated installment payments may be revised in keeping with two alternate methods. Our office can help you with seasonal estimated payments, if that’s an issue with your company.
A matter of interest
Some IRS penalties are fixed, such as the 10% penalty for early withdrawals from retirement accounts. That’s not the case with underpayments of estimated tax. For estimated tax infractions, the penalty is based on current interest rates, which are relatively low now. Still, the penalties can mount up, for large underpayments, and those penalties can be easily avoided by mooring in safe harbors.
(BiggsKofford, AICPA Client Newsletter 2nd Quarter 2014)
Since we all lead busy lives, BiggsKofford and Merrill Lynch sponsored a wonderful women’s event centering around a slow hobby to promote life balance. Deborah Helton of BiggsKofford and Sandy D’Angelo of Merrill Lynch hosted the excellent event, which took place at the Bear Creek Garden Association on Friday.
Although it was a bit windy, attendees enjoyed a beautiful thirty minute walking garden tour, followed by a presentation on investments in the Creekside meeting room.
Peak Education Senior Reception -A BIG success!!
Honored seniors, happy families and mentors, and proud Peak Education staff and board members enjoyed a delightful afternoon at The Mining Exchange on May 4th. The purpose of this celebration was to honor our graduating high school and college seniors and to thank our Ambassador Circle donors for their investment in our students’ lives.
BiggsKofford’s Associate Nick Phillips pictured-Peak Education Mentor
The REAL World – A Dose of Reality for Peak Education Students
Good grades = More Education = More money = Better lifestyle.
The students learned some valuable lessons on May 1st at the Real World. From budgeting for food and shelter to deciding if they should buy a new or used car, they experienced the additional expenses that make the real world the real world.
BiggsKofford’s Senior Associate Angela Lindblad helping students balance their checkbooks for the Peak Education Reality Fair.
Dear Friends of Blue Star,
This Saturday, Blue Star Recyclers will be holding their 4th annual Colorado Springs Recycles Community Recycling Event! They will be accepting all of your unused electronics, fluorescent bulbs, batteries and scrap metal for a small flat fee of $20.00 per carload for vehicles with televisions and/or computer monitors, $10.00 per vehicle without those items. This is a great chance to get rid of your old junk, and support Blue Star Recyclers’ mission to create local jobs for people with autism and other disAbilities!
While you are loading up your car, you can also include any of your high-quality used outdoor equipment to donate to Mountain Equipment Recyclers. 50% of the sale of all donated items will go directly to Blue Star Recyclers. See you on Saturday!
(LinkedIn, By Scott Case; Published March 11, 2014)
THIS IS A TEST.
Stop everything that you are doing and take five minutes to read this post – uninterrupted.
In an age where multi-tasking is an actual job skill, it is becoming more and more difficult to concentrate on what matters. Whether you are a startup founder, rising corporate star or passionate force for good, I suspect you could use a little more focus.
It’s a simple concept that is remarkably hard to achieve – yet it is crucial to success.
Focus on one thing and give it your all. It is a risk? Yes. Is it worth it? Absolutely. I can tell you from experience, it’s not easy. Understanding WHY you aren’t able to focus is the first step.
Be okay with the fact that it might not be the right choice. In my last post, I discussed the importance of remembering what it feels like to be uncomfortable. As hard as it is to admit you made the choice to focus on something that was not the right decision for you, be committed to turning it into a success. Take stock and decide to move in a different direction instead of trying to go down several paths simultaneously. Use this opportunity to get as much information as possible. Learn from your experience and move forward.
If you wait around for a specific opportunity, you may miss out on a great one. Steve Blank once described a missed opportunity as ‘ a favorable combination of circumstances that rarely occurs and if seized upon would have given me an advantage.’ Keeping your options open is a natural thing for people to do, but if you continue to keep your options open, ironically you may miss out on a game-changing opportunity that you can only identify by committing to one path.
Do not give into ‘shiny object syndrome’. This can kill your business. I have witnessed this with several founders (one of them being me). They are coming off the highs of a huge success with their company. They carry that momentum into their new adventure(s), but instead of committing to one new company or idea, they move forward with ten new concepts. For most entrepreneurs, part of what makes us who we are is that we are a touch ADHD and we find new things thrilling. These ‘shiny objects’ distract you by drawing your attention, time, and energy that could have been focused on rigorously exploring one direction instead of several mediocre initiatives.
Which leads us to…
Aggressively pursue a singular path to your goal. Don’t just do it well; do it really, really well. Define the goal/objective/mission you want to achieve, choose one path and run after it. Then, be the best on that path – surpassing everyone else. Zappos used to only sell shoes. Amazon only sold books and Google was just a search engine. Strip away everything but the core and fully commit to it. You can always sprinkle in new things later. Make the commitment to focus on one thing and deliver.
What happens if you discover the path you’re on isn’t right – for whatever reason?
Own the knowledge you learned on the path, embrace it and change direction. If you are in the early stages of pursuing an idea, the cycle of course corrections can happen in a single day, even a single hour. It’s more than ok – it’s a necessary part of the process. Just make sure that the correction(s) you make is based upon what you learned along the focused path.
Being able to focus on a direction and make course corrections along the way is a trait that separates the game changers from the rest of the pack.
Did you “pass” the test? Take one minute more and think about what you really need to focus on.
What can you expect from our local economy?
Led by Fred Crowley
Fred is the Associate Director and Senior Economist of the Southern Colorado Economic Forum at the University of Colorado at Colorado Springs and one of the area’s leading experts on the local economy.
Join us for the seventh year of one of our most popular sessions. We will preview the Southern Colorado Economic Forum, which is September 26, 2013. Register for the forum at www.southerncoloradoeconomicforum.com.
Just a friendly reminder that all cell phone numbers are being released to telemarketing companies and you will start to receive sales calls. You will be charged for these calls.
To prevent this, call the following number from your cell phone: 888-382-1222.
It is the National DO NOT CALL list It will only take a minute of your time. It blocks your number for five (5) years. You must call from the cell phone number you want to have blocked. You cannot call from a different phone number.
With the recent natural disaster that hit our community recently, we thought it would be pertinant for people to be reminded of the Federal Disaster Unemployment Assistance program. Here is an article from the Department of Labor, put together by Meike Alberts with Paychex.
If you have become unemployed because of a wildfire evacuation or because your worksite has been impacted by a wildfire, you may be eligible for unemployment benefits or Disaster Unemployment Assistance.
If you are currently receiving unemployment benefits and live in a wildfire burn area, we have important information for you.
Disaster Unemployment Assistance
Disaster Unemployment Assistance (DUA) provides you with financial assistance if your employment or self-employment has been lost or interrupted as a direct result of the High Park and Waldo Canyon wildfires and you are not eligible for regular unemployment benefits.
DUA is available if you:
NOTE: To receive DUA benefits, you must provide documentation to support that you were working, were self-employed, or had prospective employment at the time of the disaster. Self-employed individuals must provide federal tax forms (including all schedules) for the 2011 tax year. The documentation must be submitted within 21 days from the day your DUA claim is filed.
DUA benefits are payable to you only for weeks of unemployment in the Disaster Assistance Period. The first possible week of DUA compensation is the week beginning June 10, 2012, and ending June 16, 2012. Benefit payments may continue through December 29, 2012, as long as the unemployment continues to be a direct result of the disaster.
Filing a Claim/Questions
The Wildfire Unemployment Resource phone line requires you to leave a message with your name, social security number, callback number, and best time(s) to return your call.
You may also visit a local Disaster Recovery Center (DRC) or the Pikes Peak or Larimer County Workforce Centers.
This is a special fund set up on the federal level and that business’ individual State Unemployment Rate and Fund would not be affected by individuals filing claims.
Clients & Friends,
The past week has been challenging for our city. Many of our clients, friends and their employees have been affected by the fires in our community, and we’re all looking for ways to help others cope with this unprecedented event. Please know that you have our support, and as a firm, we would be honored to provide solutions or resources to anyone in need. Here are a few things to consider:
1. If you haven’t been affected by the Waldo Canyon fire, please consider a donation to support those who have been affected. BiggsKofford is making a special donation to the United Way. Click here if you would like to learn how you can join us and make donations to the local non-profit organizations supporting our community.
2. If you’ve lost income or your business has been been affected, you might consider if your business has insurance coverage to replace lost income, in addition to more obvious property coverage you might have. Sometimes umbrella policies are overlooked and you end up missing benefits that you paid for.
3. In addition to business coverage, some homeowner policies include additional benefits, beyond the home itself (i.e. lost income, relocation costs, temporary housing, business records, etc.). Remember to capture those costs, document them, and make a complete claim. Don’t forget to claim coverage that you’ve paid for. If you might be evacuated be sure to use your smart phone to take pictures and video of your contents before you leave, should you need to make an insurance claim.
4. If you feel you are in the line of the fire currently or if these fires have been an eye opener for future risk, we suggest creating a personal disaster recovery plan (maintaining backup records, documenting assets in your home and business, create an “evacuation packing list”, etc.). Other ideas to help with this type of planning can be found here.
BiggsKofford is a proud member of this community. It is going to take effort and support from everyone to get past this disaster. If you have need for personal support during this natural disaster, we would be happy to help you.